Reed says splitting the roles of NYSE would be `mistake'

Chairman wants changes in function, accountability

October 03, 2003|By BLOOMBERG NEWS

New York Stock Exchange interim Chairman John S. Reed rebuffed calls to split the NYSE's regulatory and commercial roles yesterday, and said the pay of the exchange's two top managers was calculated under formulas similar to those used for former Chairman Richard A. Grasso.

"It would be a mistake" to separate the NYSE's roles, Reed said at a news conference after conducting his first board meeting yesterday morning. "I don't intend to recommend that."

H. Carl McCall, who left the NYSE board last week, called for the exchange to study such a split in his resignation letter.

Reed, the former chairman of Citigroup Inc., came out of retirement Sept. 21 to lead the exchange after the furor over Grasso's $187.5 million pay package prompted his ouster. The compensation of the co-presidents, Catherine Kinney and Robert Britz, while less than Grasso's, followed the "same kind of pattern" in bonuses, deferred pay and retirement benefits, Reed said.

In rejecting demands from critics such as Sarah Teslik, executive director of the Council for Institutional Investors, to excise the NYSE's role as a regulator of the securities firms that are its customers, Reed said the 1,366 members that make their money from orders sent to the exchange floor represent his most important constituency.

"The floor people," along with Kinney and Britz, "are the core of the exchange," the 64-year-old Reed said. He will work with the seat holders more than any other constituency as he cobbles together a new governance plan to better represent investors while protecting members' businesses, he said.

"We're talking about profound change in terms of transparency and accountability, as well as function," Reed said. "There are probably six or seven people representing very much the floor and very much the public who are people whose opinions I very much have to work with."

Reed's approach was welcomed by some members.

"John Reed is extraordinarily responsive," said John Jakobson, who owns a seat. "He has the moral compass, he understands and he doesn't want to take down this 200-year-old institution. He does find the whole thing an embarrassment and he would like to clean up the mess."

The NYSE has 24 directors, including Kinney, Britz and three brokers and market-makers who work there. There is no spot on the board for the 70 percent of seat owners who lease out their seats on the trading floor, and Reed said they will be represented under whatever governance plan is adopted.